Best Credit Cards Of September 2024 – Forbes Advisor – Technologist

What is a credit card?

A credit card is a payment option that allows the cardholder to borrow money from a bank or other card issuer to make purchases. Cardholders are then issued a monthly bill to repay the bank or they will be charged interest. Credit cards are most often issued as a rectangular piece of plastic with a magnetic strip and a secure chip to identify the account.

How Do Credit Cards Work?

A credit card can be used to make a purchase of goods or services in-person or online. When you apply for and are approved for a credit card, you’re given a line of credit based on your credit score and other factors like your income.

A potential advantage to using a credit card over paying cash or a debit card is that a credit card functions like a short-term loan. By using a credit card, you have until the end of the credit card billing period (also known as a grace period) to pay what you charged to the card. You can also earn cash-back or travel rewards with some types of cards, along with extras like purchase and travel protections. The downside is that if you don’t pay the entire amount that you charged to your card, you’ll accrue interest on your purchases which can be expensive over time.

How Do Credit Card Rewards Work?

• Cardholders earn credit card rewards by making eligible purchases on a rewards card.
• Rewards may be earned in the form of cash back, miles or points.
• Earning rates are specified by the specific card and designated spending categories.
• Some cards may offer a one-time welcome bonus in credit card points.
• Cardholders might have multiple redemption options, such as cash back, free travel, gift cards or merchandise.

Since there are many types of credit card points—and countless earning structures—there’s a lot to consider when choosing a card. Learning how credit card points work can help you find the right card for your preferred rewards.

Types of Credit Cards in 2024

Although all credit cards can be used to make purchases, there are several different types of credit cards, each designed for a different goal.

How To Apply for a Credit Card

For most cards, there are several easy steps to apply for a card and be approved:

1. Check your credit score. This helps narrow down which cards may be applicable to your situation.
2. Check for preapproval or prequalification. Not all cards offer prequalification tools, but it can help to double check your odds of approval before applying.
3. Compare credit card offers. With hundreds of cards to choose from, you’ll want to ensure you’re picking the best card for your needs.
4. Fill out an application. Most people choose to do this online. You’ll just need some basic information, such as your social security number and income.
5. Submit your application and wait for a decision. Some credit cards provide instant approval though in some cases it may take longer.
6. Get your card in the mail. This may take up to 10 business days, though several cards provide immediate access to virtual numbers for online shopping.

Learn more about how to get a credit card.

How To Maximize Credit Card Rewards

Maximizing credit card rewards can be done both while earning and redeeming.

To maximize the number of credit card rewards you earn, choose a credit card that offers strong earnings on the types of purchases you make most. Cards with category bonuses in groceries, gas or travel might allow you to earn 3% or more on eligible purchases. If your purchases are all over the place, you may do best with a flat-rate 2% cash-back card. Applicants will also want to review the best credit card deals to see if there’s a bonus for new cardholders.

You can also maximize the value of your credit card rewards when redeeming rewards. Most importantly, you should focus on rewards that match your goals—whether that’s airline miles, flexible points, cash back or other rewards. Then, compare redemption options to see if any in particular are worth more. The best redemptions typically yield a minimum of 1 cent per point.

Ask an expert

What’s an important consideration if you’re trying to maximize your credit card rewards?

Becky Pokora

Credit Cards Writer

Julian Kheel

Credit Cards Expert

Clint Proctor

Credit Cards Lead Editor

 

Don’t go overboard trying to optimize all your purchases. It can be tempting to maximize every type of purchase, but getting an extra 1% back on a category you only spend $500 per year will only put an extra $5 in your pocket. Focus on your major expenses and use a flat-rate card for everything else.

 

If you’re already carrying a balance on your credit card, the interest you’re paying each month on your debt is much higher than the value of any credit card rewards you’ll earn. So you’ll want to prioritize getting yourself out of that debt first by looking at the sections of this guide covering balance transfer credit cards instead of focusing on the cards that earn travel or cash back rewards. Then once your debt is under control, you can take a closer glance at the rewards side of the equation.

 

When you’re trying to maximize credit card rewards that come in the form of points, it’s important to consider the value per point that you would get from a redemption. A good baseline redemption value is 1 cent per point, in which case 10,000 points equals $100 in value. But by learning the sweet spots of your card’s rewards program you may be able to find better redemptions, even up to 2 cents per point or more. Some cards also give you the option to transfer your points to airline or hotel partners that are known for offering high-value redemptions.

How Does Credit Card Interest Work?

Most credit cards calculate interest using the average daily balance method:

• Average daily balance method: Your credit card balance is multiplied by the card’s specified daily interest rate each day, then each day’s interest amount is added together for a monthly charge.

How Is Credit Card Interest Calculated?

The daily rate of interest is determined by dividing your card’s APR by 365 and then multiplying that number by your balance. For example, to determine the average daily balance on a card with a $10,000 balance on the first day of the billing cycle and an APR of 17%, you’d divide 17 by 365, which equals a daily rate of 0.0466%. This means the next day, your card would have a balance of $10,004.66, which is what you get when you multiply the balance of $10,000 by 1.000466.

Since the average daily balance is compounded, each day’s credit card interest calculation gets a little more expensive.

APR vs. APY vs. Interest

It’s important to understand the difference between APR and APY.

APR stands for annual percentage rate and refers to the amount of interest you’d pay on a credit card balance or other line of credit over the course of a year. On the other hand, APY stands for annual percentage yield and is used to define the amount of interest you earn on a bank account or other savings vehicle over the year.

In other words, APR is used when you’re paying interest and APY is used when you’re earning interest.

How To Get Preapproved for a Credit Card

Many issuers will let you check to see if you’re prequalified for any of their cards before you formally apply. Keep in mind that prequalification doesn’t ensure approval and should be considered more of a best guess.

Checking whether you’re prequalified is often as easy as entering your name and address on the card issuer’s website and then perusing offers, if any, that are available to you. These preapproved credit cards make it easy to check if you’re likely to be approved in advance.

How To Improve Your Credit Score

There are several steps you can take to improve your credit score. First, check your credit report to make sure there aren’t any errors that could have an adverse effect. Paying your bills on time, every time will have the single biggest impact on your score. After payment history, the next biggest factor in your credit score is the amount of debt you have. Since credit reporting agencies don’t have your income information, they use something called credit utilization instead of a debt-to-income ratio.

Credit utilization is the amount of debt you owe relative to the amount of credit you have. So if you have a balance of $3,000 on a card with a $10,000 limit, you’re using 30% of your credit. Total credit utilization is based on the aggregate amount across all your lines of credit, both what you owe and how much you have available. It’s typically suggested that utilization of 30% or below should be the goal.

What Are the Three Credit Bureaus?

There are three major credit bureaus in the U.S.:

• Equifax
• Experian
• TransUnion

Each of these agencies may use a slightly different method of evaluating your credit behavior, so it’s not uncommon to have a slightly different credit score with each agency. All three companies serve the same function: To analyze your credit behavior to generate a three-digit credit score used to determine your creditworthiness and in turn, the rates you’ll be offered on loans like a credit card or a mortgage.

What Credit Card Should I Get?

Different types of credit card users will benefit most from different types of credit cards. Here are tips to help you decide what’s the best credit card for you.

Value Shoppers

Value shoppers will likely benefit most from cash-back cards that provide rewards on everyday purchases. These cardholders will want to minimize annual fees and aren’t concerned about travel rewards or high-end perks. Check out the best cards for shopping and best cards for groceries to learn more.

Travelers

The best travel credit card of 2024 will vary based on the kind of traveler you are. If you like to play license plate ABC, check out our best cards for road trips. If you prefer your travels at 35,000 feet, check out the best airline credit cards of 2024. All of these often have top credit card offers.

Credit Builders

When you’re just starting out, it can feel like a catch-22. You need good credit to get a credit card, but you need a credit card to build good credit. Fortunately, there are some cards out there that are good for both those starting out and those needing to get back on track. Check our best first credit cards and best cards for rebuilding credit lists to learn more.

Students

College students have a plethora of credit card options because the banks understand the value of a lifetime customer. Many of these cards act as little siblings to their rewards card counterparts, giving students a chance to earn rewards without needing as much of a credit history. Check out the best credit cards for students.

Business Owners

Whether it’s a roadside stand or a shop on Etsy, small businesses have unique credit needs. Business credit cards offer benefits tailored to commerce and offer a way to keep personal and business expenses separate. If you are just starting out, one of our best cards for new businesses may do the trick. If you operate an established business, even if it’s a side hustle, check out our best business credit cards list to learn about your options.

Brand Loyalists

If you only stay at Hyatt hotels or only shop at Pottery Barn, it may make sense for you to pick up a co-branded credit card for that store, airline or hotel chain. By doing so, you’ll earn points and perks within that specific ecosystem, which you can then use to further your love of the brand.

Cardholders may also be loyal to a specific card issuer in order to continue working with a financial institution they prefer or have other accounts with. This can also be a good way to collect a specific type of rewards points. If you are loyal to a certain brand of credit card, you can limit your card search accordingly: